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Talbots Quarter Thaws After Icy Start

NEW YORK — Brisk shopping later in the first quarter couldn’t offset the erosive effect of Talbots’ deep freeze in February sales, which helped drive down net income 16 percent.<br><br>The Hingham, Mass.-based women’s specialty...

NEW YORK — Brisk shopping later in the first quarter couldn’t offset the erosive effect of Talbots’ deep freeze in February sales, which helped drive down net income 16 percent.

The Hingham, Mass.-based women’s specialty chain, which operates 917 stores, said income for the three months ended May 3 fell to $29.4 million, or 51 cents a diluted share, at the high end of the company’s previous estimates and 1 cent ahead of consensus estimates. In the year-ago quarter, profits were $35 million, or 57 cents.

Working against an 11.7 percent drop in February’s comparable-store sales, overall volume for the quarter increased 0.9 percent to $395 million over $391.3 million. Retail store sales rose 2 percent to $329.2 million compared with $321.7 million, but withered 4.3 percent on a comp basis. Catalog revenues declined 5 percent to $65.8 million from $69.6 million in the prior-year period, partially due to a planned 3 percent reduction in the number of books circulated and an 11 percent reduction in pages.

“We believe while our business was affected by the continuation of a difficult retail environment, it was primarily the severity of February’s weather that resulted in a significant drop in sales which we didn’t expect to recapture by the end of the quarter,” Arnold?Zetcher, chairman, president and chief executive, said. “However we are pleased that a better-than-expected performance in March and our on-plan results in April enabled us to offset much of the weakness.”

Zetcher noted that Talbots’ main spring catalog received a positive response from customers, helping it to spark a pickup in regular-price selling in March. In addition, other marketing initiatives — including television commercials, in-store drawings and its mid-season sales — were all positive contributors in the quarter.

While Talbots has been known for the conservative tone of its merchandise, for spring, the retailer experienced “the greatest success where we looked the most modern, new and feminine,” said Harold?Bosworth, chief merchandising officer. Career and casual items in soft fabrics or feminine detailing and fashion-right colors, such as apple green, resonated with customers. He said the firm’s strategy is to evolve the product appropriately to insure its merchandise is different and fresh, yet always classic in a modern way rather than simply traditional.

This story first appeared in the May 22, 2003 issue of WWD.  Subscribe Today.

Bosworth said Talbots will offer customers greater versatility through its separates business, more comfort with better and more seasonless fabrications, better color balance and more clearly defined apparel categories. These categories include casual sportswear, refined sportswear, which includes career, and dresses and occasion dressing.

He said stretch and more wear-now fabrics will become a more important part of the casual mix.

Edward Larsen, chief financial officer, didn’t offer specific earnings guidance for the current quarter, but said Talbots will continue with its conservative posture regarding financial planning, given the continued uncertainties, the company’s recent mailing of its latest catalog and the newly arrived summer floor set. He said May comps are expected to land in the mid- to high-single digits.

“While the first quarter offered many challenges, we are very proud of the fact we managed our costs and inventory effectively and achieved a very respectable level of profitability,” Zetcher said.